Self-Funded Search vs. Traditional Search Funds
Open on YouTube ↗This episode is a structured live debate — not a standard buyer-operator interview — between Greg Geronimous (a traditional search fund advocate, former traditional searcher who acquired, grew, and exited a business with a partner, now a traditional search investor) and Robert Graham (a self-funded search advocate, operator, and founder of SIG, a firm that advises and invests in self-funded searchers). Host Will Smith moderates. The debate covers the core tradeoffs between the two ETA models across economics, ownership, governance, risk, flexibility, and probability of success. Greg argues traditional search delivers superior deal support, investor credibility, larger deal access, and a proven track record via the Stanford study. Robert counters that traditional search capital is the most expensive form of capital a searcher can take — requiring 25-35% IRR hurdles to unlock full equity — and that self-funded searchers at SIG average 73% ownership of $2.6m EBITDA businesses versus 10% or less ownership in median $1.8m EBITDA traditional deals. The debate surfaces key tensions: traditional search offers pre-packaged investor networks and mentorship but constrains geography, exit timing, and economics; self-funded search maximizes flexibility and ownership but demands personal financial runway and self-assembled support structures. Neither model is declared a winner, but both debaters agree self-funded is superior for those who can fund their own search.
Deal facts
- multiple
- 6x EBITDA (median traditional search, per Stanford study); 4x (typical self-funded SBA deal cited by Robert)
- sde ebitda
- Median traditional deal: $1.8m EBITDA; SIG self-funded average: $2.6m EBITDA; largest cited self-funded deal: $9m EBITDA
- financing structure
- Traditional: ~50-60% debt; Self-funded SBA: ~90% LTV
- notes
- No single deal discussed — this is a debate episode comparing the two models. Enterprise value range for traditional: 46% of deals >$12m EV; self-funded range cited as $3-8m EV (per Jordan Carter / SIG). Traditional searcher ownership at close: 10% or less (median); self-funded searcher ownership: ~73% average (SIG stat).
What's working
- Traditional search: investor support, credibility with sellers, ability to close larger deals, formal board governance, and a proven track record documented in the Stanford study
- Self-funded search: maximum flexibility in geography, industry, deal structure, and hold period; majority ownership and control retained by the searcher; no obligation to exit; ability to use SBA debt, seller financing, or alternative capital structures
- Self-funded searchers at SIG average 73% common equity ownership in businesses averaging $2.6m EBITDA, compared to 10% or less at close for traditional searchers in median $1.8m EBITDA businesses
- Self-funded model allows searchers to choose board members with direct industry experience and to set their own governance terms
What's hard
- Self-funded: requires funding your own search costs and living expenses for potentially two years, plus broken-deal due diligence costs — accessible only to those who can afford it
- Traditional search: fixed, non-negotiable economics (8.33% equity in three tranches, high performance hurdle of 25-35% IRR to unlock final tranche); searchers give up majority ownership regardless of deal quality
- Traditional search: geographic flexibility limited — searchers generally expected to relocate wherever the deal is, though this is evolving
- Traditional search: investors may be spread across 50+ searchers and unable to return calls, undermining the mentorship value proposition
- Traditional search: over 50% of searchers face equity gaps in their cap tables at close (per Endurance Search study cited by Robert)
- Self-funded: assembling a quality board and investor network is entirely on the searcher; no pre-packaged ecosystem
- One in three traditional searchers never closes a deal (Stanford study); 28% of traditional solo searchers who do close destroy capital
Notable quotes
Self-funded search provides the highest probability path to superior economic outcomes and also true business ownership.
To get the additional eight and a third equity that greg talked about related to performance a researcher has to return 25 to 35 irr in their deal — that's a hurdle rate over four times higher than what lps would expect from a private equity firm.
I would just point to the fact that 46 percent of search deals are greater than 12 million dollars of enterprise value — I think that's a much more representative of the reality.
Traditional search capital — it's more expensive than private equity capital, it's more expensive than venture capital, it's more expensive than credit card debt, more expensive than a payday loan when you consider how much upside a searcher gives away by taking traditional search capital.
Flexibility and optionality are the best reasons to go self-funded if you can somehow afford to go self-funded — and I think that's an important factor to acknowledge here.